Last checked at 25 Feb 2009 13:49
Evolutec Group plc
("Evolutec" or the "Company")
Preliminary Results for the year ended 31 December 2008
Evolutec Group plc (AIM: EVC), announces Preliminary Results for the year ended 31 December 2008.
Highlights
Proposed acquisition of Nanoco Tech plc
The profit for the year was £0.10 million before taxation (2007, loss £1.93 million)
Total interest payments for the year were £301k (2007,£375k)
At the end of the financial year the company consolidated its cash deposits to a single deposit at HSBC Corporation. This, together with the general reduction in interest rates, is expected to result in a significant reduction in future interest income.
Net cash and cash equivalents on 31 December were £6.03 million (2007, £5.80 million)
Based on 25.9 million issued ordinary shares, Evolutec had a cash value of 23.3p per share (2007, 23p per share) at the year end
Enquiries:
Evolutec Group plc 07771 525 875
David Bloxham
Zeus Capital Limited 0161 831 1512
Richard Hughes
CHAIRMAN'S REVIEW
Throughout 2008, Evolutec has operated as an investing company under the AIM (Alternative Investment Market) Rules pending any further transaction. As noted in the previous Annual Report, the company has out-licensed all its intellectual property in the biotechnology field.
The principal assets of Evolutec have been its listing on the AIM market of the London Stock Exchange and its cash and cash equivalent reserve. The main activities of the directors throughout 2008 have been focussed on preserving these two assets while seeking a single company investment opportunity. There were no changes in the Board of Directors during the course of the year and the company complied with its regulatory obligations to maintain its listing status. In December, the company announced that it had appointed Zeus Capital Limited as its Nominated Advisor and Broker in anticipation of a reverse transaction.
Operating costs for 2008 were significantly reduced to £205k (2007; £2,369k) and mostly comprised directors' compensation and professional fees. Interest income of £301k (2007; £375k) was sufficient to cover these costs and resulted in a small profit before taxation of £96k (2007; £1,925k loss). The group ended the year with cash and cash equivalents of £6,033k (2007; £5,797k) and total assets of £6,118k (2007; £5,987k).
Given the financial turbulence during the second half of 2008, the company decided to change its investment policy at the end of the year. Previously, the cash deposit had been split between at least two banks, each with a minimum credit rating of F1/A. The objective was to derive maximum interest consistent with flexibility to undertake ongoing activity whilst safeguarding the asset. Under the conditions prevailing at the end of 2008, the Board decided that safeguarding the asset was its sole concern and as a consequence it was decided to invest the entire deposit with HSBC Corporation, the UK's largest bank by market capitalisation. As a consequence of this change interest income fell sharply in the last few months of the year.
It was announced earlier today that the board of Evolutec had reached agreement with Nanoco Tech Plc ("Nanoco") on the terms of a recommended share acquisition by Evolutec of the entire issued and to be issued share capital of Nanoco by means of a court approved scheme of arrangement.
Nanoco is a leading nanotechnology company involved in the development and manufacture of fluorescent semiconducting materials called quantum dots. Nanoco was founded in 2001 in order to progress the development of quantum dot technology that was previously developed at the University of Manchester and Imperial College, London.
Quantum dots are a platform technology with uses in a wide range of applications from life sciences through to optoelectronics dominated by solid state lighting, photovoltaics, and next generation displays. Quantum dot based applications have the ability to potentially offer significant benefits in performance and energy savings compared to those materials currently used in these industry sectors. Given the interest in developing a low carbon economy, worldwide, there should be significant opportunities for Nanoco and the company has demonstrated this potential by establishing its first significant commercialisation collaboration with a major Japanese company.
Further information on the proposed acquisition and action you are required to take is set out in an Admission Document which has been posted to all shareholders today.
I would like to take this opportunity to thank the directors, investors and suppliers of the company for their support during the year. It has taken longer to find a suitable financial transaction than had been initially expected mostly due to averse market conditions. Nevertheless, it is hoped that the opportunity with Nanoco will provide a significant new start for the company.
David P Bloxham
Chairman
25 February 2009
Consolidated income statementFor the year ended 31 December 2008
| Year ended 31 December 2008 | Year ended 31 December 2007 | ||||
| Continuing operations | Note | £000 | £000 | ||
| Revenue | 2 | - | 82 | ||
| Cost of sales | - | (1) | |||
| Gross Profit | - | 81 | |||
| Selling and marketing costs | - | (160) | |||
| Research and development expenditure | - | (1,050) | |||
| Administrative expenses | (205) | (1,159) | |||
| Operating loss | (205) | (2,288) | |||
| Finance income | 5 | 301 | 375 | ||
| Finance costs | 5 | - | (12) | ||
| Profit/(loss) before tax | 96 | (1,925) | |||
| Taxation | 6 | (19) | 162 | ||
| Profit/(loss) for the period | 77 | (1,763) | |||
| Basic and diluted profit/(loss) per ordinary share from continuing activities | 7 | 0.3p | (6.8)p | ||
Balance sheetsAs at 31 December 2008
| Group 31 December 2008 | Group 31 December 2007 | Company 31 December 2008 | Company 31 December 2007 | ||
| ASSETS | Note | £000 | £000 | £000 | £000 |
| Non-current assets | |||||
| Investments | - | - | 5,791 | 5,791 | |
| - | - | 5,791 | 5,791 | ||
| Current assets | |||||
| Research and development tax credits | - | 162 | - | - | |
| Trade and other receivables | 85 | 28 | - | - | |
| Cash and cash equivalents | 6,033 | 5,797 | - | - | |
| 6,118 | 5,987 | - | - | ||
| Total assets | 6,118 | 5,987 | 5,791 | 5,791 | |
| EQUITY | |||||
| Share capital | 2 | 27,037 | 27,037 | 27,037 | 27,037 |
| Other reserves | 3 | 8,518 | 8,518 | 4,784 | 4,784 |
| Retained deficit | (29,525) | (29,602) | (26,030) | (26,030) | |
| Equity shareholders' funds | 6,030 | 5,953 | 5,791 | 5,791 | |
| LIABILITIES | |||||
| Current liabilities | |||||
| Trade and other payables | 88 | 34 | - | - | |
| Total liabilities | 88 | 34 | - | - | |
| Total equity and liabilities | 6,118 | 5,987 | 5,791 | 5,791 |
Consolidated statements of changes in shareholders' equity
| Share | Share | Other | Retained | ||
| capital | Premium | reserves | deficit | Total | |
| Group | £000 | £000 | £000 | £000 | £000 |
| Balance at 1 January 2007 | 2,595 | 24,442 | 9,083 | (27,839) | 8,281 |
| Net income recognised directly in equity | |||||
| Loss for the year | - | - | - | (1,763) | (1,763) |
| Total recognised income and expense for the period | - | - | - | (1,763) | (1,763) |
| Share-based payments credit | - | - | (565) | - | (565) |
| Balance at 31 December 2007 | 2,595 | 24,442 | 8,518 | (29,602) | 5,953 |
| Net income recognised directly in equity | |||||
| Profit for the year | - | - | - | 77 | 77 |
| Total recognised income and expense for the period | - | - | - | 77 | 77 |
| Balance at 31 December 2008 | 2,595 | 24,442 | 8,518 | (29,525) | 6,030 |
| Company | |||||
| Balance at 1 January 2007 | 2,595 | 24,442 | 5,349 | (25,386) | 7,000 |
| Net income recognised directly in equity | |||||
| Impairment charge | - | - | - | (644) | (644) |
| Total recognised income and expense for the period | - | - | - | (644) | (644) |
| Share-based payments credit | - | - | (565) | - | (565) |
| Balance at 31 December 2007 | 2,595 | 24,442 | 4,784 | (26,030) | 5,791 |
| Net income recognised directly in equity | - | - | - | - | - |
| Total recognised income and expense for the period | - | - | - | - | - |
| Balance at 31 December 2008 | 2,595 | 24,442 | 4,784 | (26,030) | 5,791 |
| Cash flow statements for the year ended 31 December 2008 | Group Year ended 31 December 2008 | Group Year ended 31 December 2007 | Company Year ended 31 December 2008
| Company Year ended 31 December 2007 | |
| £000 | £000 | £000 | £000 | ||
| Cash flows from operating activities | |||||
| Profit/(loss) for the period | 77 | (1,763) | - | (644) | |
| Taxation | 19 | (162) | - | - | |
| Depreciation | - | 140 | - | - | |
| Interest received | (301) | (375) | - | - | |
| Fair value adjustment on investment in subsidiary | - | - | - | 644 | |
| Share options - value of employee services | - | (565) | - | - | |
| (Increase)/Decrease in trade and other receivables | (57) | 174 | - | - | |
| Decrease/(increase) in trade and other payables | 35 | (1,354) | - | - | |
| Cash used by operations | (227) | (3,905) | - | - | |
| Taxation received | 162 | 645 | - | - | |
| Net cash outflow from operating activities | (65) | (3,260) | - | - | |
| Cash flows from investing activities | |||||
| Increase in investment in subsidiary | - | - | - | (3,147) | |
| Interest received | 301 | 375 | - | - | |
| Net cash generated from/(applied to) investing activities | 301 | 375 | - | (3,147) | |
| Net increase/(decrease) in cash and cash equivalents | 236 | (2,885) | - | (3,147) | |
| Cash and cash equivalents at the start of the period | 5,797 | 8,682 | - | 3,147 | |
| Cash and cash equivalents at the end of the period | 6,033 | 5,797 | - | - |
Notes to the financial statements
for the year ended 31 December 2008
1. Accounting policies and basis of preparation
Following the cessation of its research and development-based pharmaceutical business, Evolutec has been classified as an investing company in the terms of the rules of the Alternative Investment Market of the London Stock Exchange (AIM). The Directors believe that the Group has sufficient funds available to continue for the foreseeable future; therefore the financial statements have been prepared on the going concern basis.
The directors have identified a single investment opportunity and expect to conclude this process by 12 April 2009 (the anniversary of the 2008 AGM). Should a transaction not be completed by this time, the directors intend to consult with the members of the Company to obtain an extension of this deadline. The largest shareholder has indicated that it would support this approach and would not support any proposal to liquidate the company.
Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations endorsed by the EU and with those parts of the Companies Act, 1985 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.
New accounting standards At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective:
IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009)
IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009)
Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations (effective 1 January 2009)
Improvements to IFRSs (effective 1 January 2009 other than certain amendments effective 1 July 2009)
IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)
IFRS 8 Operating Segments (effective 1 January 2009)
The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group in its current form.
Company income statement In accordance with the provisions of Section 230 of the Companies Act 1985, no separate income statement has been presented for the Evolutec Group plc. The results for the Company are also presented under IFRS.
Accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.
Investments are carried at cost less any provision for impairment.
Basis of consolidation The consolidated financial statements of the Group include the accounts of Evolutec Group plc and all its subsidiary undertakings (together, the "Group"), made up to 31 December 2008. Inter-company transactions are eliminated on consolidation.
The identifiable assets and liabilities of subsidiary undertakings accounted for under acquisition accounting principles are included in the consolidated balance sheet at their fair values at the date of acquisition. The results and cash flows of such subsidiaries are brought into the Group accounts only from the date of acquisition.
The combination of Evolutec Group plc and Evolutec Limited in 2004 was accounted for under merger accounting principles.
Revenue The Group generates revenue by licensing its technologies. The recognition of such revenue, including up front and milestone payments, is dependent on the terms of the related arrangement, having regard to the ongoing risks and rewards of the arrangement, and the existence of any performance or repayment obligations with any third party.
Non-refundable access fees, options fees and milestone payments receivable for participation by a third party in development and commercialisation of a product development candidate are recognised when they become contractually binding, provided there are no related commitments of the Group. Where there are related commitments, revenue is recognised on a percentage-of-completion basis in line with the actual levels of expenditure incurred in fulfilling these commitments. All other licence income and contract research fees are recognised over the accounting period to which the relevant services relate. Revenues derived from grants received are recognised in line with the related expenditure. Royalty income is recognised in relation to sales to which the royalty relates.
Operating leases Costs in respect of operating leases are charged to the income statement on a straight-line basis over the terms of the leases.
Share-based payments The Group makes equity-settled share-based payments to its employees and Directors. Equity-settled share-based payments are measured at fair value at the date of grant and expensed on a straight-line basis over the vesting period of the award. At each balance sheet date, Evolutec revises its estimate of the number of options that are expected to become exercisable.
The value of any shares or options granted is charged to the income statement over the period the shares vest, with a corresponding credit to reserves. When share options are exercised, the proceeds received, net of any transaction costs, are credited to share capital (nominal value) and share premium.
The principal assumptions used to calculate the value of options issued are:
Share price volatility 45%
Risk free rate of return 4.5%
Date of exercise Normally assumed to be the first possible exercise date
Employee benefits All employee benefit costs, notably holiday pay and contributions to personal defined contribution pension plans, are charged to the income statement on an accruals basis. The Group does not offer any other post-retirement benefits.
Taxation Current tax, including UK corporation tax and research and development tax credits, is provided (or shown) at amounts expected to be paid (or recovered) using the tax rates or laws that have been enacted, or substantially enacted, by the balance sheet date.
Credit is taken in the accounting period for research and development tax credits, which will be claimed from HM Revenue and Customs in respect of qualifying research and development costs incurred in the same accounting period.
Deferred tax is recognised in respect of all temporary differences identified at the balance sheet date. Temporary differences are differences between the carrying amount of the Group's assets and liabilities and their tax base.
A deferred tax asset is recognised only when, on the basis of all the available evidence, it can be regarded as probable that there will be suitable taxable profits, within the same jurisdiction, in the foreseeable future against which the deductible temporary difference can be utilised.
Deferred tax is provided on temporary differences arising in subsidiaries, except where the timing of reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the asset is realised or liability settled, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Measurement of deferred tax liabilities and assets reflects the tax consequence expected to follow from the manner in which the asset or liability is recovered or settled.
Property, plant and equipment Property, plant and equipment are stated at historic cost less depreciation and any provision for impairment. Historic cost comprises the purchase price together with any incidental costs of acquisition. Depreciation is calculated to write off the cost, less residual value, of tangible fixed assets in equal annual instalments over their estimated useful lives as follows:
Plant and machinery 3-5 years
Fixtures and fittings 3 years
The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that carrying value may not be recoverable. The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each financial year end.
Internally-generated intangible assets - product research and development Development expenditure on new or substantially improved products is capitalised as an intangible asset and amortised through cost of sales over the expected useful life of the product concerned. Capitalisation commences from the point at which the technical feasibility and commercial viability of the product can be demonstrated and the Group is satisfied that it is probable that future economic benefit will result from the product once completed. This is usually at the point of regulatory filing in a major market and approval is highly probable. Capitalisation ceases when the product is ready for launch. Where assets are acquired or constructed in order to provide facilities for research and development over a number of years, they are capitalised and depreciated over their useful lives. Expenditure relating to clinical trials is accrued on a percentage-of-completion basis with reference to fee estimates with third parties.
Expenditure on research and development activities which do not meet the above criteria is charged to the income statement as incurred.
Financial instruments The Group's financial instruments comprise cash and cash equivalents, held-to-maturity financial assets and various receivables and payables, such as trade receivables and trade and other payables, which arise directly from its operations. The Group does not enter into derivative transactions or other forms of hedging arrangements.
Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group's management has the positive intention and ability to hold to maturity. Assets in this category are held at amortised cost. Held-to-maturity investments include short-term investments with original maturities of more than 3 months.
Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits together with other, short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value..
Foreign currencies Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the transaction date. Monetary assets and liabilities in foreign currencies are retranslated into sterling at the rates of exchange ruling at the balance sheet date. Differences arising due to exchange rate fluctuations are taken to the income statement in the period in which they arise.
2. Share Capital
| Number of ordinary shares | Share capital £000 | Share premium £000 | Total £000 | |
| At 1 January, 31 December 2007 and 31 December 2008 | 25,949,996 | 2,595 | 24,442 | 27,037 |
The authorised share capital of the Company at 31 December 2008 was £7,700,000 divided into 77,000,000 ordinary shares of 10p each (2007: 77,000,000).
All issued shares are fully paid.
The rights and restrictions attaching to the ordinary shares are set out in the Articles of Association.
Capital management objectives and policies
Evolutec Group Plc's capital management objectives are:
to ensure the Group's ability to continue as a going concern
to provide an adequate return to shareholders
By seeking a single investment opportunity in the technology, healthcare or service related sectors.
The Group monitors capital on the basis of the carrying value of the amount of equity.
3. Other reserves
| Share-based payments reserve £000 | Capital redemption reserve £000 | Merger reserve £000 | Own shares held by Employee Benefit Trust £000 | Total £000 | |
| Group | |||||
| Balance at 1 January 2007 | 565 | 4,804 | 3,734 | (20) | 9,083 |
| Share-based payments credit | (565) | - | - | - | (565) |
| Balance at 31 December 2007 | - | 4,804 | 3,734 | (20) | 8,518 |
| Balance at 31 December 2008 | - | 4,804 | 3,734 | (20) | 8,518 |
| Company | |||||
| Balance at 1 January 2007 | 565 | 4,804 | - | (20) | 5,349 |
| Share-based payments credit | (565) | - | - | - | (565) |
| Balance at 31 December 2007 | - | 4,804 | - | (20) | 4,784 |
| Balance at 31 December 2008 | - | 4,804 | - | (20) | 4,784 |
4. Publication of non-statutory accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.
The balance sheets at 31 December 2008 and the consolidated income statement, statements of changes in shareholders' equity, cash flow statements and associated notes for the year then ended have been extracted from the Group's 2008 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under section 237 of the Companies Act 1985.
These financial statements have not yet been delivered to the Registrar of Companies.
5. Copies of the annual report and financial statements
The Annual Report and Financial Statements will be posted to shareholders today. Further copies will be available to the public, free of charge at the Company's registered office, 3 More London Riverside, London SE1 2AQ and on the Company's website, www.evolutec.com.